The US government is mulling the creation of a digital dollar. What is being done to do this?
US President Joe Biden’s administration is gradually moving the United States closer to creating a digital dollar. As part of a series of reports released by various branches of the administration on Friday, an interagency working group formed will begin meeting regularly to support ongoing Federal Reserve research into the possibility of a central bank digital currency (CBDC). It will also take up preparations with the rest of the federal government if or when the Fed decides to create such a currency. We tell you more about what is happening.
As a reminder, the national digital currency is an unspoken trend in the development of various economies. Although this tool has not yet gained enough popularity and prevalence, it is already causing fears of connoisseurs of freedom.
The point is that such currency allows the government to monitor every transaction of a citizen and, if necessary, control or limit them. In theory, there is a positive side to this, because in this case it is unlikely that money could be diverted to illegal activities. However, on top of that, the government would get the right to monitor every individual’s entire financial life.
Bitcoin versus the dollar
Mike Brock of The Block project commented on this topic. Here is his rejoinder from Twitter.
I think CBDC is a really bad idea. A liberal democratic society should always be cautious about giving the government the level of power that such technology can provide. Even if you trust today’s politicians, that doesn’t mean you will trust tomorrow’s politicians.
What will the digital dollar be like?
National Economic Council Director Brian Dees and Treasury Secretary Janet Yellen told reporters during a press conference that the White House, Treasury Department and other executive agencies want to do their part to support the Fed’s ongoing analysis and experimentation with the digital dollar. According to The Block’s sources, the Treasury is also recommending that federal regulators develop a framework for non-bank payment providers.
In other words, the US government is preparing all the necessary infrastructure to meet potential Fed requests quickly. As soon as this body deems it appropriate to issue a US CBDC, the Treasury Department will begin the process.
US Treasury Secretary Janet Yellen
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Meanwhile, officials continue to debate whether the digital dollar is needed to keep the traditional dollar competitive against currencies of countries that are already experimenting with CBDC. They also include China, one of the United States’ strategic rivals for economic policy. The interagency group will hold regular meetings to further consider this and other issues.
Read also: Which country wins the race to create a national digital currency CBDC?
Incidentally, the Chinese government still protects local crypto investors in the field of law, as cryptocurrencies are recognised as virtual property in the country. As a reminder, China has been pursuing an aggressive policy towards crypto for quite some time, with the country officially banning Bitcoin mining last year. In the end, though, that didn’t stop some local miners from continuing their work.
The share of Chinese miners in the Bitcoin hashray is shown in yellow in the chart
According to David Lesperance, founder of law firm Lesperance & Associates, one of the world’s most hostile countries to Bitcoin has yet to ban cryptocurrency ownership. More specifically, today cryptocurrency owners in China are protected by law in case of theft, misappropriation or breach of credit agreement. However, Lesperance also stressed that cryptocurrency exchanges are still banned in China.
We believe that the release of digital versions of popular national currencies will still take place. In this way, people will get additional convenience in the form of speed of transactions, but the government will gain more control over people's finances. In theory, this would be an excuse for people to get in touch with full-fledged cryptocurrencies, which due to their decentralisation have no central regulator. Although the timeline for the launch of such an instrument has not yet been determined.
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